UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
[X] Quarterly Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended July 31, 2002
[ ] Transition Report pursuant to 13 or 15(d) of the Securities Exchange
Act of 1934
For the transition period from to
Commission File Number: 000-19457
LEGAL ACCESS TECHNOLOGIES, INC.
-------------------------------
(Exact name of Small Business Issuer as specified in its charter)
Nevada 87-0473323
- ------ ----------
(State or other jurisdiction of (IRS Employer
incorporation) Identification No.)
2300 W. Sahara Ave., Suite 500
Las Vegas, NV 89102
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code (702) 949-6115
Indicate by a check mark whether the issuer (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the issuer was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days [X] Yes [ ] No
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: 6,071,232 shares of Common Stock as
of July 31, 2002.
Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]
PART 1 - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in accordance
with the instructions to Form 10-QSB and Item 310(b) of Regulation S-B and,
therefore, do not include all information and footnotes necessary for a complete
presentation of financial position, results of operations, cash flows, and
stockholders' equity (deficiency) in conformity with generally accepted
accounting principles. In the opinion of management, all adjustments considered
necessary for a fair presentation of the results of operations and financial
position have been included and all such adjustments are of a normal recurring
nature. Operating results for the three months ended July 31, 2002 are not
necessarily indicative of the results that can be expected for the year ending
April 30, 2003.
The financial statements present the activities of Legal Access Technologies,
Inc. ("LATI") and its subsidiaries Tele-Lawyer, Inc. ("Tele-Lawyer") and
Perspectives Health Management Corp. ("Perspectives"). All significant
inter-company balances and transactions have been eliminated in the
consolidation.
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LEGAL ACCESS TECHNOLOGIES, INC. AND SUBSIDIARIES
BALANCE SHEETS
JULY 31, 2002 AND APRIL 30, 2001
================================================================================
July 31, 2002
(Unaudited) April 30, 2002
---------------- ----------------
ASSETS
Current Assets
Cash and cash equivalents $ 568,728 $ 1,145,512
Accounts receivable, trade 372,799 316,912
Accounts receivable, discontinued
business segment, net of allowances 1,134,892 1,229,363
Prepaid expenses and other 22,140
---------------- ----------------
2,076,419 2,713,927
Property and equipment, net
of accumulated depreciation
of $93,451 and $112,702 217,117 160,031
Software License, net 203,581 213,147
---------------- ----------------
$ 2,497,117 $ 3,087,105
================ ================
LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIENCY)
Current liabilities
Accounts payable $ 99,497 $ 79,735
Accrued expenses 150,649 155,686
---------------- ----------------
250,146 235,421
Long-term liabilities
Convertible notes and accrued interest 254,375 249,288
---------------- ----------------
504,521 484,709
---------------- ----------------
Stockholders' equity (deficiency)
Common stock, $0.001 par
value, 100,000,000 shares
authorized, 6,071,232 shares
issued and outstanding 6,071 6,071
Additional paid-in capital 6,031,614 6,031,614
Deficit (4,045,089) (3,435,289)
---------------- ----------------
1,992,596 2,602,396
---------------- ----------------
---------------- ----------------
$ 2,497,117 $ 3,087,105
================ ================
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LEGAL ACCESS TECHNOLOGIES, INC. AND SUBSIDIARIES
STATEMENTS OF OPERATIONS
THREE-MONTH PERIOD ENDED JULY 31, 2002 AND 2001 (UNAUDITED)
================================================================================
Three Months Three Months
July 31, 2002 July 31, 2001
--------------- ---------------
- -
Revenues $ 110,135 $ 55,607
--------------- ---------------
Operating costs and expenses
Legal support services 109,582 26,928
Software research and development 218,540 223,496
Selling, general, and administrative 390,467 215,175
--------------- ---------------
718,589 465,599
--------------- ---------------
Loss from operations (608,454) (409,992)
Other income (expense)
Interest (1,946) (5,449)
Rentals 600 601
--------------- ---------------
Loss from continuing operations (609,800) (414,840)
Income from discontinued operations 46,308
--------------- ---------------
Net loss $ (609,800) $ (368,532)
=============== ===============
Basic and diluted income
(loss) per common share:
Continuing operations $ (0.10) $ (0.07)
Discontinued operations $ - $ 0.01
--------------- ---------------
Net $ (0.10) $ (0.06)
=============== ===============
Weighted average common shares outstanding 6,071,232 5,688,115
=============== ===============
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LEGAL ACCESS TECHNOLOGIES, INC. AND SUBSIDIARIES
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
THREE-MONTH PERIOD ENDED JULY 31, 2002 (UNAUDITED)
================================================================================
Additional
Shares issued Common stock paid-in
and outstanding par value Capital Deficit
--------------- ------------- ---------- ----------
Balance, May 1, 2002 6,071,232 $ 6,071 $ 6,031,614 (3,435,289)
Net loss (609,800)
--------------- ------------- ---------- ----------
Balance July 31, 2002 6,071,232 $ 6,071 $ 6,031,614 (4,045,089)
=============== ============= ========== ==========
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LEGAL ACCESS TECHNOLOGIES, INC. AND SUBSIDIARIES
STATEMENTS OF CASH FLOWS
THREE-MONTH PERIOD ENDED JULY 31, 2002 AND 2001 (UNAUDITED)
================================================================================
Three Months Three Months
July 31, 2002 July 31, 2001
---------------- ----------------
Operating activities
Net cash used in operating
activities $ (593,467) $ (190,998)
---------------- ----------------
Investing activities
Purchase of software license (1,250)
Purchase of property and equipment (76,538)
---------------- ----------------
Net cash used in investing activities (77,788)
---------------- ----------------
Financing activities
Proceeds from borrowings,
officers / shareholders 157,000
Net cash received from sale of
assets of discontinued business
segment 285,236
Collection of accounts receivable
of a discontinued business
segment 94,471
---------------- ----------------
Net cash provided by
financing activities 94,471 442,236
---------------- ----------------
Net increase (decrease) in
cash and cash equivalents (576,784) 251,238
Cash and cash equivalents,
beginning of quarter 1,145,512 1,302
---------------- ----------------
Cash and cash equivalents,
end of quarter $ 568,728 $ 252,540
================ ================
Reconciliation of net loss to net
cash used in operating activities
Net loss (609,800) (368,533)
Non-cash items:
Depreciation and amortization 30,268 10,873
Common stock issued for services 100,000
Increase in operating (assets) liabilities
Accounts receivable (55,887) (24,939)
Prepaid expenses and other 22,140
Accounts payable 19,762 (10,245)
Accrued expenses (5,037)
Accrued interest 5,087 101,846
---------------- ----------------
Net cash used in operating activities $ (593,467) $ (190,998)
================ ================
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ITEM 1. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The Current Plan of Operations
Historically, as part of the Tele-Lawyer operations, we have been in the
business of arranging for the provision of legal advice and information to
consumers of legal services through licensed attorneys. We also produce and
sell specialized phone conferencing applications to professionals and
associations. The specialized phone conference applications are most often in
the form of continuing education programs for attorneys called "Tele-Seminars".
More recently, we changed our business focus by concentrating on sales of
technology and services to, and the development of strategic partnerships with,
various non-profit associations and government agencies in order to create a
number of statewide hubs for access to legal services. This process has
involved the expansion of our product and service offerings, as well as our
geographic coverage.
During this and our next fiscal year, we plan to set up these statewide hubs
through strategic partnerships and vendor arrangements with existing legal aid
groups, bar associations and state and federal courts ("Legal Service
Organizations"). These legal service hubs will feature dual phone and web
access as well as several choices of price, service and type of product for
consumers of legal services. The vendor and partnership arrangements with Legal
Service Organizations will not only provide us with direct income from the sale
of our technology and services, these arrangements will provide a network for
the marketing and sale to consumers of our unbundled legal products and services
within each state.
In addition, we plan to expand the sale of these unbundled products and services
through "sweeper team" activities directed at other referral sources within each
state (such as libraries, prosecutors, public defenders, affinity groups, law
schools, government agencies and law firms), and then once we have established
hubs in at least 50% of the states, we will advance to national arrangements for
marketing the unbundled legal services and hubs.
We expect to become profitable through the expansion of our client/affiliate
network of Legal Service Organizations nationwide. We generate revenues through
a Legal Service Organization by providing them with technology solutions as well
as by providing unbundled products and services to persons they refer to our
consumer website and phone lines. We currently service a relatively small
number of Legal Service Organizations; however, we have recently added 6 new
contracts with Legal Service Organizations in Nevada, Ohio, Illinois,
Pennsylvania and Tennessee, and, after some delay, are finally in the process of
fully implementing 3 older agreements in Illinois, Florida and Maryland. The
delay in the implementation of these agreements was caused by delays in the
release of the new version of our case management system. This has resulted in
a delay in our anticipated income growth as well as sales to new Legal Service
Organizations. In August of this year, we completed the development of this new
version of the case management system, and thus management anticipates income
growth and additional sales to follow in the second and third quarters of this
year.
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In general, the development and implementation period of for our web based case
management and phone products and services has taken longer than we had
expected. However, management expects that this time period will shorten with
regard to any future launch as our products have become more standardized and
stable. If our belief in this regard is accurate, management believes, but
there is no assurance, that the expansion of the affiliate network of Legal
Service Organizations will result in profitable operations and positive cash
flows prior to year end.
Technology Development
Subsequent to the end of our first quarter, but prior to the date of this
report, we completed the planned enhancements to our case management system.
These enhancements, we believed, were necessary to properly service our legal
aid clients.
Our case management system now contains all of the advanced administrative and
reporting features required by the funding sources of these organizations. The
product is differentiated from other case management systems in the market
because it is web-based and integrates with our phone system. The integration
of this web-based case management system with our computer telephony allows
legal aid organizations to function as virtual, wide-area-network call centers
greatly increasing their effectiveness and efficiency. We expect to have our
new systems implemented at each of the legal aid organizations currently under
contract by the end of October, 2002.
We are also continuing negotiations with a provider of technology that enables
law firms to file documents directly to a court via the Internet. We believe
that this technology will enhance our position as a leading provider of
electronic solutions to the legal profession. Prior negotiations with another
provider of such technology have stalled for the time being and no plans are in
place at this time with regard to any acquisition of that system. Any
acquisition of this type of technology will be dependent on the timing of our
implementation of current client contracts, as well as the receipt of the
financing necessary to enter into this additional business opportunity. Our
decision will also be colored by the fact that we have secured a contract with
the Nevada Department of Hearings and Appeals to provide electronic filing and
other technology services.
Management continues to investigate, review and discuss opportunities to acquire
or partner in technology development and deployment that enhance the delivery of
legal services and support the operation of Legal Service Organizations.
Assets
At July 31, 2002, we had cash of $568,728 as compared to $1,145,512 as of April
30, 2002. The decrease is due to cash used in the development of our case
management system. Due to problems that arose during the fourth quarter of last
year, we have experienced numerous delays in the development and implementation
of its case management system. Management believes these problems have been
largely resolved and that upon implementation of the systems, revenues will
increase significantly.
At July 31, 2002, trade accounts receivable was $372,799 as compared with
$316,912 as of April 30, 2002. The increase reflects our new agreements with
Legal Service Organizations and other product sales. Not included in these
accounts receivable are those of Perspectives, which are labeled as "Accounts
receivable, discontinued business segment, net of allowances".
8
Equipment purchased totaled approximately $76,500 and equipment, net of
accumulated depreciation was $217,117 as of July 31, 2002 as compared to
$160,031 as of April 30, 2002.
Liabilities and Stockholders' Equity
As of July 31, 2002, we had accounts payable of $99,497 as compared to $79,735
as of April 30, 2002. In addition, we had accrued expenses of $150,649 as of
July 31, 2002 as compared to $155,686 as of April 30, 2002. The increase in
accounts payable was attributable to an increase in our operating costs and
expenses. Accrued expenses include $135,000 of brokerage fees related to the
sale of the assets of Perspectives.
As of July 31, 2002, the balance outstanding of convertible notes we owed was
$203,500, plus accrued interest of $50,875, due in 2006.
Stockholders' equity was $1,992,596 as of July 31, 2002, as compared to
$2,602,396 as of April 30, 2002. Losses sustained during this quarter are
directly attributable to delays in the development of our case management
system. These delays caused us to be unable to realize potential income from
our existing contracts. We believe that we have been successful in our efforts
to eliminate these problems and expect losses to be reduced as existing
contracts are activated during the second and third quarters of this year.
Results of Operations
We generated $110,135 in revenues during the three months ended January 31,
2002. We generated $55,607 during the same three months of the prior year.
Although sales have continued to increase from quarter to quarter, revenue
growth has been slowed by the longer than expected time to develop and implement
the new version of our case management system. As discussed above, we recently
completed the development tasks necessary to release this new version and expect
to begin operations at each of the legal aid organizations currently under
contract during the second and third quarters of 2002. General and
Administrative Expenses were $390,467 during the three month period ended July
31, 2002 and $215,175 during the same period in the prior year. This increase
reflects our increased sales efforts, as well as efforts to secure additional
financing. We incurred $218,540 in software research and development costs
during the three month period ended July 31, 2002, and $223,496 during the same
period in the prior year. As a result, we showed a net loss of $609,800 or $.10
per share in this quarter, as compared to a loss of $368,532 or $.06 per share
in the first quarter last year.
We continue to make relatively large investments in the development of our
software products, focusing on the completion of the web-based systems for Legal
Service Organizations. Shortly after implementation of the systems that have
been developed, we expect revenues to increase. This should occur in the second
and third quarters of this year.
Liquidity and Capital Resources
As of July 31, 2002, we maintained $568,728 in cash and cash equivalents.
During the three months ended July 31, 2002, we used $593,467 in operating
activities and $77,788 in investing activities. Our financing activities
provided $94,471 from the collection of accounts receivable of a discontinued
business segment. We expect cash flows from operations to increase upon the
full deployment of our technology with our current clients.
9
We expect continued negative cash flows from our operating activities and to
make additional capital expenditures in order to expand our affiliate network of
Legal Services Organizations. The cash requirements for any expansion in the
short term will need to be obtained by outside financing. Management is
currently working with several consultants to raise additional capital through
the sale of our equity securities. As an alternative and in conjunction with
such financing activities, management has taken steps recently to cut operating
and development costs in order to minimize any liquidity problems. Subsequent
to the reported quarter, management began limited cost cutting measures that it
expects to accelerate in October and November if no financing is obtained.
Forward Looking Statements
The information contained in this section and elsewhere may at times represent
management's best estimates of our future financial and technological
performance, based upon assumptions believed to be reasonable. Management makes
no representation or warranty, however, as to the accuracy or completeness of
any of these assumptions, and nothing contained in this document should be
relied upon as a promise or representation as to any future performance or
events. Our ability to accomplish these objectives and whether or not it will
be financially successful is dependent upon numerous factors, each of which
could have a material effect on the results obtained. Some of these factors are
within the discretion and control of management and others are beyond
management's control. Management considers the assumptions and hypothesis used
in preparing any forward looking assessments of profitability contained in this
document to be reasonable; however, we cannot assure investors that any
projections or assessments contained in this document, or otherwise made by
management, will be realized or achieved at any level.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We recently brought suit against our one remaining note holder for a
determination of our obligations under its notes and for the enforcement of an
agreement we believe was reached with that note holder. The note holder then
filed a counterclaim against us asking for full payment of all principal and
interest (due in 2006), and alleging a default under the notes. Management does
not believe that this matter will have a material adverse effect on our
financial position, results of operations or cash flows.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None
ITEM 3. DEFAULT UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits:
99.1 Officers' Certification under Section 906 of the Sarbanes-Oxley
Act of 2002
(b) Reports on Form 8-K: None
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SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
LEGAL ACCESS TECHNOLOGIES, INC.
Date: September 16, 2002 /s/ MICHAEL A. CANE
_______________________
MICHAEL A. CANE
Chief Executive Officer
President, Secretary & Director,
Principal Executive Officer
/s/ STEVEN D. FELLOWS
_______________________
STEVEN D. FELLOWS
Chief Financial Officer &
Principal Accounting Officer,
Principal Financial Officer
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